Drought, wind and heat: when fire seasons start earlier and last longer


Owen Price, University of Wollongong

The New South Wales Rural Fire Service declared the earliest total fire bans in its history this week. The entire state was declared to be in drought on the same day.

The combination of winter drought and hot, dry weather has made dangerous fires increasingly likely.




Read more:
After the firestorm: the health implications of returning to a bushfire zone


Already this week two fires on the south coast have escaped containment lines and destroyed houses. The weather during these fires was 6℃ warmer than the August average, dry and extremely windy. The wind speed peaked at 104 kilometres an hour in Bega and 85km/h in Nowra, two towns close to where fires broke out.

Under these conditions, bushfires will spread quickly, produce large numbers of embers and are hard to stop.

Our fire seasons now start earlier and last longer. This means we’re increasingly likely to see repeats of historically large fires threatening residential areas.

Fire seasons are longer

Current dry conditions are reflected in the maps of live fuel moisture produced by Dr Rachael Nolan of Western Sydney University.


Nolan R.H., Boer M.M., de Dios V.R., Caccamo G., Bradstock R.A. (2016), Large-scale, dynamic transformations in fuel moisture drive wildfire activity across southeastern Australia. Geophysical Research Letters 43, 4229-4238.

This method tracks the weekly moisture content of the forests in southern Australia, as observed by NASA’s MODIS satellite. The latest map shows a patchy distribution of dry areas and a drying trend over recent weeks.

It looks like NSW’s fire season has already started, and it’s likely to be bad. Last year’s fire season also extended well into autumn, with serious bushfires burning in mid-April.

Fire agencies usually enjoy a six-month break from bushfires between April and September, but this year they had only three months’ respite.

This reflects evidence of a trend toward more extreme fire weather over the past 30 years, and lengthening fire seasons.

This problem is being keenly felt in western United States, where fire agencies have warned that the fire season now lasts all year round. Not only that, there is clear evidence climate change is increasing fire activity in the United States; the record for the largest fire in California history has been broken two years in a row.

Alarming precedents

The most damaging fire season for NSW in the past 30 years was in October 2013 when the Linksview fire destroyed 200 houses in the Blue Mountains.

The build-up to that season was eerily similar to this year, with a winter drought and bushfires in September, but the moisture maps show that the forests are drier now than at the same time in 2013, and we have already seen serious bushfires in August.




Read more:
Future bushfires will be worse: we need to adapt now


As we move into September and October, the weather will warm, which means any remaining moisture in the ground and plants will evaporate even faster than at present, and fires will be more intense and spread faster. The only thing that will reduce the risk is soaking rain of at least 100mm.

Whether or not that will occur in the next two months is almost impossible to predict. At the moment it seems unlikely. The Bureau of Meteorology’s latest seasonal forecast, issued on August 16, considers it likely that dry conditions will persist for the next three months.

The heightened risk of bushfire this season should be a wake-up call for residents in bushfire-prone areas. Most people in really risky areas such as the Blue Mountains are well prepared, but many people who are a little more removed from the forests are not aware of the risk.




Read more:
Where to take refuge in your home during a bushfire


For example, many residents of Wollongong probably don’t know this October is the 50th anniversary of the great 1968 fires that swept down the Illawarra Escarpment into the suburbs of Figtree, Bulli, Austinmer and others.

The footprint of the 1968 Illawarra fires, which burned through residential areas.

If the same footprint of fire were to occur again, some 5,000 houses would be affected. The present indicators suggest a repeat of this event is more likely than at any time for decades.

Residents need to prepare a bushfire survival plan, which includes a decision on whether to stay and defend or to leave as soon as they learn about a nearby bushfire.




Read more:
Our deadly bushfire gamble: risk your life or bet your house


Current research at University of Wollongong suggests that the biggest influence on the risk of house loss during a bushfire is the actions that the residents themselves take. This includes ensuring that natural and man-made fuels are kept to a minimum in the garden, especially close to the house, and also defending the house from spot-fires caused by embers.

The Rural Fire Service has a wealth of advice for preparing for bushfires on its website.

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We’re look at a torrid upcoming fire season, dependent on the vagaries of the Australian climate. Either way, now is the time for people to brace themselves and get prepared.

Owen Price, Senior Research Fellow, Centre for Environmental Risk Management of Bushfires, University of Wollongong

This article was originally published on The Conversation. Read the original article.

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View from The Hill – It’s time for Turnbull to put his authority on the line


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Malcolm Turnbull is faced with a highly volatile situation. But he may need to manage it by taking a risk.
AAP/Lukas Coch

Michelle Grattan, University of Canberra

As Prime Minister Malcolm Turnbull struggles with the National Energy Guarantee, the Liberals are in an existential moment – no less dramatic because in recent history, they’ve made a habit of such moments.

Are they going to allow a toxic combination of revenge politics, anti-climate change ideology, panic over the Longman result, and sheer muddle-headedness kill the chance of giving certainty to energy investment and tear down or mortally wound their prime minister?

One pro-Turnbull backbencher describes it as a “hostage situation”, with a small number “holding the nation to ransom”. By and large, the backbench is happy with the NEG, this backbencher affirms.

Turnbull now should put his authority on the line over his energy policy, which he’s augmented by concessions and extra price measures.

This doesn’t mean asking for a vote on his leadership, but perhaps it should mean breaking the normal practice of operating by consensus and instead taking a formal vote on the policy at Tuesday’s Coalition parties’ meeting.

Yes, it would be a big risk. Some sources do say there is leadership stirring going on in Liberal ranks. (Certainly, News Corp appears to be helping fuel the situation – it’s a nice irony that a lot of trouble is coming from the government’s favourite media organisation, not the one it so dislikes, the ABC.)

It would be better for Turnbull to take on his enemies than allow his position to be eroded progressively on their timetable, which reportedly is to wait until September, after another bad Newspoll.

If he can’t hold the situation at this point, his grip is only going to get weaker quite quickly.

Turnbull, Treasurer Scott Morrison and Energy Minister Josh Frydenberg have spent the past few days cobbling together initiatives in an attempt to appease mutinous backbenchers. This comes less than a week after the NEG had majority support in the Coalition party room.

Turnbull looks weak and desperate, but had little choice because he could not afford a number of MPs crossing the floor.

The proposed changes include regulating rather than legislating the 26% target for emissions reduction in the electricity sector.

To counter his earlier warnings about a Shorten government easily increasing the target if it were set in regulation, Turnbull said in a Sunday social media video: “we will introduce a new law that ensures that before any new emissions target is set, or changed, the energy regulators and the [Australian Competition and Consumer Commission] must advise what that means for your electricity prices.

“This will ensure that any government who wants to change this, has to tell you up front what the cost will be.”

The revamped package also includes provision for a “price expectation”, with companies that don’t meet it facing penalties, plus a range of other market interventions on power companies.

“We will set a price expectation which should be the most anyone pays,” Turnbull said.

“And if the prices remain too high, we’ll implement the toughest penalties, until you’re getting value for money.

“We will not hesitate to use a big stick, as we did with gas, to make sure the big companies do the right thing by you, their customers.”

These measures will satisfy some critics within the Coalition. They don’t satisfy Abbott – and an unknown number of others.

The dissidents last week included some Nationals but the pragmatists in that party, which had its federal council in Canberra on Friday and Saturday, are anxious for a settlement (that includes a gesture to coal). Nationals cabinet ministers have been embarrassed, however, by being out of the loop as Turnbull crafted his concessions.

All that’s happened vindicates, incidentally, the Labor states and ACT declining to sign on to the NEG until after the party room finalised its position. Those jurisdictions, and federal Labor, have had one of their demands – having the target set by regulation – met, thanks to the dissidents.

After the reports of the change, Abbott was quickly on 2GB on Saturday to stir trouble.

“On Tuesday, in the party room, we were told it is absolutely essential to legislate the Paris target, because if we don’t legislate it Labor can just increase it willy-nilly, and last night it seems we’ve dumped the idea of legislation, for god knows what reason,” he said. “It’s no way to run a government, making absolute commitments on Tuesday and breaking them on Friday”.

While once again declaring he was about switching policy rather than leader, he also posed the question: “Can you change the policy without changing the leader?” Asked if there was going to be “a leadership attempt”, he said: “I don’t know”.

And that takes us straight to Peter Dutton, whose performance last week was highly provocative.

On Thursday Dutton played footsie on 2GB about his possible route out of cabinet. On Friday the Daily Telegraph said he was being asked to challenge Turnbull. On Saturday that paper’s headline was “Dutton Ready to Roll – Minister considers Turnbull challenge …”.

Dutton stayed silent all Friday. Only on Saturday morning did he tweet: “In relation to media stories today, just to make very clear, the Prime Minister has my support and I support the policies of the Government. My position hasn’t changed from my comments last Thursday.”

As they say, too little, too late. Dutton’s long silence had encouraged the speculation. His colleagues will judge (some will know) whether this was political misjudgement or disloyalty.

Turnbull is faced with a highly volatile situation. But how to handle it?

Firstly, Turnbull and his ministers need to get a package out on Monday that can be delivered (do some of the extra measures require state legislation?), is free of glitches, and provides insurgents with minimum opportunities for floor crossing. Cabinet ministers were discussing this over dinner on Sunday night.

Secondly, Senate leader Mathias Cormann, Dutton’s very good friend, should tell his mate, as they take their 5.30 am constitutional in Canberra’s cold, that allowing others to trail his coat is not appropriate behaviour for a cabinet minister.

Cormann might usefully make a couple of other points. Leaders who come to power by the sword often end badly. And if there were a leadership contest, who would know what surprise result might eventuate (who, in 2009. thought it would be Abbott who’d defeat Turnbull)?

Thirdly, Turnbull needs to get strong, articulate backbench supporters of the NEG out there countering the substance of the dissidents’ policy arguments.

And finally, he should press the party room into a decisive stand.

Chancing his arm might at worst backfire, leading quickly to his losing his head. But if so, he would have lost it before too long anyway.

Update:

Malcolm Turnbull’s situation has been worsened by the latest Fairfax Fairfax Media/Ipsos poll, published Monday, which has the Coalition trailing Labor 45-55% – a dramatic drop from a month ago when the gap was 49-51%.

This poll, which tends to be volatile, varies significantly from Newspoll earlier this month, which had the Coalition behind 49-51%.

Turnbull still has a strong lead over Bill Shorten as preferred prime minister in the Fairfax poll – 48-36%. But the gap has narrowed greatly compared with a month ago, when Turnbull led 57-30%.

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The poll showed that a majority – 54% – back the National Energy Guarantee, with only 22% against. Among Coalition voters 64% back the NEG, with support among Labor voters at 59%.

Michelle Grattan, Professorial Fellow, University of Canberra

This article was originally published on The Conversation. Read the original article.

The royal commission should result not only in new regulation, but new education


Dirk Baur, University of Western Australia; Elizabeth Ooi, University of Western Australia, and Paul Gerrans, University of Western Australia

The Financial Services Royal Commission has not only shown that banks and their representatives have behaved appallingly, but that we need better-educated consumers.

It is naive not to expect new schemes will pop up to replace the now (or soon to be) banned practices. There is a clear pattern of repeating unconscionable behaviour in the financial services industry.

Consumers need to be trained to ask the right questions. “How much do I have to pay each week over the life of the loan including (hidden) fees?”, “How much do I have to pay in fees each year?”, and “Why is this right for me rather than right for the bank?”

Being able to answer such questions can help reduce the invariably expensive and imperfect regulation that generally follows inquiries such as the royal commission.




Read more:
Royal commission scandals are the result of poor financial regulation, not literacy


A 20-year-old, let’s call him Mark, just started his first job paying A$45,000 a year. Confidently, he walks into a bank branch, applies and is approved for a A$30,000 car loan within 20 minutes. He wants a new car and isn’t too concerned about the 12.5% annual interest.

Mark states afterwards he didn’t know he could hardly afford the loan. It cost more than A$40,000 over five years. And with other commitments he was in over his head, leaving no room for changes in work, illness, etc.

Should Mark be expected to know? Was he taught any of this? Could he know if he had made some effort, or should the bank have informed him better and been more explicit?

And where does the responsibility sit?

We assumed in the story (loosely related to one heard by the royal commission) that the bank had informed Mark about rates and fees, but had not effectively communicated what this meant in terms of weekly payments or total cost.

For the moment, let’s put aside the primary role of the banks and their representatives – it is their practices on the line and we are not blaming or judging the victims. Neither do we know the client’s individual circumstances.

But, caveats established, how much information must be presented and what can be reasonably expected in terms of the financial literacy level of customers? If the response from the royal commission is increased disclosure, these are the relevant questions.

But this still leaves whether we can be confident that education is being provided so customers can make informed decisions.




Read more:
There are serious problems with the concept of ‘financial literacy’


Financial literacy is in the National Curriculum and being taught to primary and secondary students. But, given Mark’s age, there is no guarantee he would have received financial literacy education at school.

For the future Marks, financial literacy is now embedded, but coverage remains uneven as what is taught varies by state and school level.

Elsewhere policy is continuing the trend of transferring financial responsibilities from government to individuals, which requires greater financial literacy. For example, the NDIS aims to build a new disability marketplace, requiring important financial decisions from individuals or their representatives.

But the royal commission has clearly shown people suffered by following bad advice or by not questioning numbers sufficiently.

How were 24% p.a. car loans supported by banks and accepted by customers? Were the numbers too abstract and customers didn’t know what 24% a year meant in dollar terms?

Not just new regulation but new education

Better-educated people are better equipped to ask the right questions and make more informed decisions.

We can’t just rely on regulated disclosure – we need to continue to ensure the “simple” questions about the total costs over the life of the loan and whether it’s right for the customer, rather than just the bank, are taught. Teaching consumers to ask these questions, to question the information provided, is important and can enhance the regulation.

Who should provide this education? Not those with a conflict of interest such as financial institutions. If the royal commission tells us one thing it is that incentives matter.

If you are incentivised, or part of an incentivised brand, it may be better you don’t have a role in education. The Dollarmites scandal may not be the biggest scandal this year but it’s emblematic and part of a problem.

Schools, VET and universities can do better and more.

A new round of regulation will create new incentives to avoid it. Regulation tries to catch up and focuses on institutions – here the banks. But new financial technologies mean financial providers don’t look like they used to – for example, new app-based peer-to-peer lenders at your favourite store.

We can’t rely on education alone but we also can’t rely on regulation alone.

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Let’s recognise the limitations of regulation as we try to improve outcomes and consider whether some of the money spent on designing and enforcing new regulations may be better spent further educating our future customers.

Dirk Baur, Professor of Finance, University of Western Australia; Elizabeth Ooi, Lecturer, Finance, University of Western Australia, and Paul Gerrans, Professor of Finance, University of Western Australia

This article was originally published on The Conversation. Read the original article.

Turnbull dumps emissions legislation to stop rebels crossing the floor


Michelle Grattan, University of Canberra

Prime Minister Malcolm Turnbull has done a backflip on his proposal to put the emission reduction target into legislation, in the face of rebel backbenchers threatening to cross the floor.

The new plan is for the energy target – a 26% reduction to carbon dioxide emissions for the electricity sector – to be set by an executive order of the minister. Such an order cannot be disallowed.

The stunning retreat emerged as the energy issue threatened to turn into a crisis for Turnbull’s leadership, and the government worked on measures to reduce power prices to meet the demands of Coalition dissidents.

Cabinet Minister Peter Dutton remained conspicuously silent on Friday in face of a report that conservatives in the Liberal party were urging him to challenge Malcolm Turnbull within weeks.




Read more:
VIDEO: Michelle Grattan on the NEG showdown and a ray of parliamentary unity after Fraser Anning’s racist speech


A report in Sydney’s Daily Telegraph injected leadership speculation into the centre of Turnbull’s already highly difficult battle to curb a backbench rebellion over the government’s National Energy Guarantee (NEG).

The government has consistently refused a demand from the Victorian Labor government that the target should be set by regulation not legislation.




Read more:
Infographic: the National Energy Guarantee at a glance


The executive order would be accompanied by an Australian Competition and Consumer Commission report to parliament on the price impact of the target.

If Turnbull had gone ahead with legislation, and enough backbenchers had crossed the floor to defeat the bill, it would have amounted to an effective vote of no confidence in his leadership.

While some of the backbench rebels will be satisfied with the price package, it is not clear whether this will include Tony Abbott and his hardcore supporters, who want to bring Turnbull down and have smelled political blood.

Tuesday’s Coalition parties meeting will discuss the new proposals.

On another front, Nationals leader and Deputy Prime Minister Michael McCormack is facing mounting criticism of his performance, as the Nationals federal council meets in Canberra at the weekend. The energy issue is likely to be front and centre there.

Despite his public silence, it is understood that Dutton on Friday privately told Turnbull that he was comfortable with the government’s energy policy.

The backbench critics have had two major areas of concern. They did not think the NEG plan did enough to reduce electricity prices. And they were unhappy with the 26% target for reducing emissions in the electricity sector being legislated.

But the retreat from the target being enshrined in legislation will not be enough to satisfy those who want Australia to walk away from the target altogether and pull out of the Paris climate agreement.

Up to 10 backbenchers had threatened to cross the floor on the emissions reduction legislation.

The report about Dutton followed his interview with Ray Hadley on 2GB on Thursday in which Hadley challenged him over whether he was “blindly loyal” to Turnbull.

Dutton said he gave his views privately as a cabinet member and wasn’t going to bag out his colleagues or the Prime Minister publicly.

“If my position changes – that is, it gets to a point where I can’t accept what the government’s proposing or I don’t agree – then the Westminster system is very clear: you resign your commission,” he told Hadley.

The Telegraph report said Dutton was being urged to challenge Turnbull “on a policy platform of lower immigration levels and a new energy policy focusing on cheaper bills rather than lowering emissions.” Conservative MPs had told the Telegraph “a ‘torn’ Mr Dutton was considering his options,” the report said.

Asked on Nine whether Dutton was going to have a crack at the leadership, Defence Industry Minister Christopher Pyne said “absolutely not.”

Pyne also rejected the suggestion the government was on the ropes. In an obvious reference to Abbott and his supporters, Pyne said: “The polls are about 50-50 and there’s a lot of hyperventilating going on, and there’s a few people I think who are trying to put the band back together from the late 2000s, noughties.”




Read more:
Grattan on Friday: Malcolm Turnbull’s NEG remains in snake-infested territory


Finance minister Mathias Cormann said he had not heard any talk of some conservatives urging Dutton to challenge.

Cormann, a fellow conservative who is close to Dutton and said they had had four walks this week at 5.30 am, told Sky,: “We are both very committed to the success of the Turnbull Government and to winning the next election.

“We strongly support the Turnbull leadership of course and we want to see the Coalition government successfully re-elected early next year when the election is due.”




Read more:
The National Energy Guarantee is a flagship policy. So why hasn’t the modelling been made public?


The prices package would be based on recommendations made in the recent report of the Australian Competition and Consumer Commission.

The government has been briefing that Turnbull is willing to take a “big stick” to companies to ensure consumers get better deals.

The government is looking at cracking down on how companies bid into the wholesale electricity market and secret contracts between different players.

There would be closer scrutiny of energy companies buying and selling electricity internally between their own generation and retail companies at inflated prices.

This would put the contracts of “gentailers” under attention to ensure transfer prices did not disadvantage consumers. The ACCC said high transfer prices “raise concerns about the potential for substantial profit to be allocated to the wholesale businesses.”

The ACCC has also urged more transparency on direct contracts between retailers and individual generators, proposing these be put on a public register.

Among other changes being discusssed are:

  • providing the Australian Energy Regulator (AER) with powers to deal with manipulation of the wholesale market.

  • requiring the reporting and disclosing of over-the-counter trades (in a de-identified format) to make available important market information.

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    expanding the AER wholesale market monitoring functions to include monitoring, analysing and reporting on the contract market.

Michelle Grattan, Professorial Fellow, University of Canberra

This article was originally published on The Conversation. Read the original article.

Five questions about Nazi Germany and how it relates to Australian politics today



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The primary legacy of Nazism was the second world war, which led to the deaths of more than 50 million people.
Shutterstock

Matt Fitzpatrick, Flinders University

Almost every day comparisons of contemporary politics to Nazi Germany are cropping up in the news. But are these comparisons historically grounded, or are they an abuse of Godwin’s law? Here are some answers to some questions that have cropped up recently.

1) What is Nazism? What is fascism? Would Australia’s right-wing populists fit into either of these categories?

Nazism and fascism were aligned far-right political movements that came to power in Germany (Nazism) and Italy (fascism) after the first world war. There were also fascist parties elsewhere, including in Britain and in Nazi-allied states like Croatia and Romania.

Their policies were grounded in radical nationalism (which often drew on racist ideas), economic corporatism (that is, a particularly authoritarian form of capitalism), anti-democratic, authoritarian and violent politics, anti-unionism and anti-communism.

These parties were an outgrowth of the specific political and economic conditions of the post-war period, but they have attracted some on the radical right globally, who either consider themselves or are considered by others to be neo-Nazi or neo-fascist. In Australia, there are few avowed neo-Nazis or neo-fascist parties, and those that exist are not popular.

Populist parties in Australia that are seeking to gain votes by appealing to anti-immigration and racist sentiments are generally outgrowths of the long-standing tradition of such politics in the political history of post-1788 Australia.




Read more:
View from The Hill: A ray of bipartisan good comes out of obscure senator’s hate speech


Unlike the Nazis and the fascists, who ruthlessly destroyed democratic institutions upon coming to power, the most prominent anti-immigration parties in Australia don’t claim to want to abolish democracy. Instead they want to use the liberal democratic system to entrench what might be called “white” or “settler” privilege, at the expense of migrants and Indigenous people. Their model is generally the White Australia Policy, not Nazi Germany.

2) Why do people talk about Nazism or fascism with such fear and horror?

The primary legacy of Nazism was the second world war, which led to the deaths of more than 50 million people. Nazis killed almost 6 million European Jews and (directly and indirectly) around 20 million Russians, all in pursuit of an illusory territory secure from racial or political threats. It has been usefully referred to as thanatopolitics – a politics of death founded on the false promise of securing life.

3) Senator Fraser Anning used the phrase ‘final solution‘ and it upset people. Why?

The phrase is a direct reference to the Nazi term Endlösung der Judenfrage (The final solution of the Jewish question), which in the end meant genocide. It is clear that this goes well beyond “dog whistling”. It is instead the kind of language that (until now) only the most rabid and marginal of Nazis would deliberately choose to use.

The term recalls the desire of the state to kill its citizens and the citizens of states around it to secure its own racial fantasy. Anning argues that his usage was unintentional. This is difficult to believe, given the context of the speech.

What is especially chilling about it is that evokes not only the genocidal policies of the Nazi regime, but also its earlier “final solutions” (grounded in the global eugenics movement for ‘racial hygiene’) which included halting Jewish migration, then taking away the civic rights of Jews, then expelling Jews, and then finally murdering them.

To use this kind of historically and racially charged language to talk about migrants was a new low, even in Australian politics, where tolerance of racially charged political statements is extraordinarily high.

4) Some Australian press commentators have said that Nazism was left-wing. Is this right?

No. Nazis and fascists were decidedly right-wing and fervently anti-communist. There was a small and short-lived group of Nazis clustered around the Strasser brothers who were interested in a racial strain of anti-capitalist politics. They might loosely be termed “socialist”, but they were completely purged from the Nazi party very early on.

On coming to power, the first targets of the Nazis were communists and socialists. The formal name of the Nazi party, the NSDAP (National Socialist German Workers Party), was a failed attempt to attract workers to the party and away from the left. It failed, and the main voters for the Nazis remained the lower middle classes – the economically vulnerable who most feared the spectre of socialism.

5) Some activists have likened Australia’s offshore detention centres to concentration camps **Is that a fair description?

It pays to be careful here. Firstly, not all concentration camps were in Nazi Germany. Concentration camps were used by the British in South Africa, by the Spanish in Cuba and by the US in the Philippines.

Secondly, when talking about Nazi Germany, a distinction should be drawn between concentration camps (which were places of detention without trial used by the state to sequester undesired non-criminal elements from other citizens) and extermination camps, which were places of execution.




Read more:
George Brandis warns Liberals against rise of populist right


It was in the extermination camps (among other, less organised sites) that the Nazis perpetrated the Holocaust.

No two historical examples of concentration camps are exactly alike, but Australia’s offshore mandatory detention centres fit most elements of the description. Those in them are detained without trial. Their purpose is political rather than penological. These are not places of rehabilitation or even punishment. They are indefinite holding centres for those classed as politically problematic.

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However, to say Australia is running a detention network with many of the attributes of earlier concentration camps does not mean that Australia is a dictatorship, or that the policy is intrinsically “fascist”. Liberal democracies have their own forms of inhumanity and nations such as Britain and the US have also made use of such camps in the past.

Matt Fitzpatrick, Associate Professor in International History, Flinders University

This article was originally published on The Conversation. Read the original article.

Vital Signs: Turkey shows the economic pain of global democratic backsliding


Richard Holden, UNSW

Vital Signs is a regular economic wrap from UNSW economics professor Richard Holden (@profholden). Vital Signs aims to contextualise weekly economic events and cut through the noise of the data affecting global economies.


As American baseball legend Yogi Berra once supposedly quipped, “It’s déjà vu all over again.” Three years ago the crisis was in Greece, now it’s Turkey. Another European summer and another European economic crisis.

It’s tempting to say that being in Europe is all the two situations have in common. Greece’s population is a little over 10 million; Turkey’s is nearly 80 million. Greece’s troubles were triggered by out-of-control government debt; Turkey’s government debt-to-GDP ratio is quite low. The Greek government was on the loopy left; Turkey’s ruling Justice and Development Party is on the conservative right.

But the similarities between the Greek and Turkish crises are deeper than the differences.

Both were brought about by decades of ignorant, populist economics. When crisis hit, both countries had leaders who instantly made things worse. And in both cases the world’s global capital capital markets have proved to be an unforgiving judge.

Erdogan’s voodoo economics

Turkey finds itself in crisis not because of massive government debt – although it has been rising pretty rapidly of late and private-sector debt is a real issue – but because of a large current account deficit.

The current account deficit – roughly the difference between the value of what it imports and what it exports – is running at more than US$60 billion at an annualised rate.

This means Turkey is a large net borrower from the rest of the world.

President Recep Tayyip Erdogan has goosed GDP through cheap foreign credit and low real interest rates. But unlike tinpot strongmen who worry mainly about holding onto power tomorrow, global markets look far into the future.

And this year markets decided that Turkey’s economic future looked pretty bleak.

A plummeting lira

The Turkish currency, the lira, has fallen by more than 40% against the US dollar this year. Since more than half of Turkey’s foreign debt (government plus private) is denominated in foreign currencies, this is a big problem.

It is estimated that there is more than US$200 billion of dollar-denominated Turkish corporate debt. When the lira falls, foreign-denominated debt rises, making it hard to service, let alone repay.

At the same time, the inflationary spiral this sets off does huge damage to the domestic economy. It is estimated that Turkey’s annual inflation rate is running at more than 100%.

Erdogan doesn’t want interest rates to rise – and he has bullied the central bank into doing so later and less than the bank otherwise might have. He is on record as saying that higher interest rates increase inflation, rather than the opposite, as every first-year economics student knows.

To Erdogan, black is white, night is day, up is down.

US President Donald Trump announced last week that “Aluminum will now be 20% and steel 50%. Our relations with Turkey are not good at this time!” Erdogan’s response has been to call for a boycott of iPhones and enact retaliatory tariffs of as much as 140% on a range of US goods.

Erdogan did secure US$15 billion in foreign investment from Qatar, after meeting Emir Sheikh Tamim Bin Hamad Bin Al Thani in Ankara on Wednesday. That might stop some of the bleeding for now, but this gives Qatar tremendous leverage.

The real cost of this support won’t be measured in basis points.

Global contagion?

The big risk here is that the foreign holders of all this dollar-denominated Turkish debt get into trouble as Turkey struggles to repay or defaults. Even the Bank of International Settlements doesn’t easily know who all these debt holders are, but banks in Spain and France appear to be significantly exposed – especially Spain.

A run on the Turkish currency could turn into damage to balance sheets of banks across Europe, triggering a potential debt crisis in countries like Spain.

That’s some distance off for now. But it looms.

All this will likely end in some kind of International Monetary Fund assistance package – but that’s going to come with conditions. Folks who like to use the term “neoliberal” will dub such conditions as brutal austerity.

Others will consider the conditions the cost of stabilising an economy pushed to the brink by a financially illiterate megalomaniac.

Economics in a world of democratic backsliding

Turkey may be at the centre of the crisis du jour, but Erdogan is but one of a cast of nasty, illiberal characters. Although they occupy varying positions on the ideological spectrum, from Poland to Hungary to Latin America, there has been significant democratic backsliding in recent years.

These strongmen do violence to principles of liberal democracy – often literally. They also damage their economies and, as a consequence, their people.

Institutions like the International Monetary Fund will probably handle the problem in Turkey, although it would be a lot simpler if Erdogan just allowed interest rates to increase and solve the problem directly.

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But sadly we can expect more illiberal and nonsensical economics from these illiberal strongmen. It is contagious populist ideology more than financial contagion that should scare us right now.

Richard Holden, Professor of Economics and PLuS Alliance Fellow, UNSW

This article was originally published on The Conversation. Read the original article.

Grattan on Friday: Malcolm Turnbull’s NEG remains in snake-infested territory


Michelle Grattan, University of Canberra

Malcolm Turnbull had a party-room victory but a god-awful week, and it wasn’t because his approval plunged in Monday’s Newspoll. His energy policy is back in the mire, and Tony Abbott is being – as one colleague neatly describes it – the agent of chaos.

It’s nearly unimaginable how the Coalition chooses to replay that old self-destructive record. In Bill Shorten’s office they’ve been digging out the 2009 headlines, such as “Battered Turnbull faces mutiny” and “Abbott leaves leader in crisis”.

Well, Turnbull is not “in crisis” but things are quite a serious mess, as those who hate him, plus others who don’t, sharpen their attack in another round of the climate wars.

In Tuesday’s Coalition parties meeting, where Turnbull won strong support for his energy policy, several reserved their right to cross the floor on the emissions reduction legislation, and later more said they might do so. There was talk of up to ten.




Read more:
Turnbull beats Abbott over NEG, now Frydenberg has to win Victoria


Assistant minister Keith Pitt, from the Nationals, let rumours run that he might stand down from the frontbench to oppose the legislation (a cynical Nationals source said: “he’s made hollow threats before”).

Resources Minister Matt Canavan (also a National), asked in the Senate whether he’d attempted to persuade Pitt on the National Energy Guarantee, said he’d “tried to persuade all I’ve spoken to about the common sense of adopting” the NEG.

The Nationals’ federal council meets this weekend in Canberra, where there will be a lot of chatter about the NEG. Deputy Prime Minister Michael McCormack in his council address will emphasise the vital importance of lowering power prices – very safe ground – but given his divided ranks, he isn’t expected to come out with a passionate advocacy of the technology-neutral NEG. A motion on the council’s agenda calls on the government “to support the building of high-energy, low-emissions, coal-fired power stations”.

It’s one thing for backbenchers to talk about crossing the floor, quite another to do it. Turnbull is working hard on the rebels – though obviously not on Abbott – to try to bring them around.

They have wish lists, and Turnbull, the ultimate transactional politician, is seeking doable ways to mollify them. The government has already indicated it will accept the Australian Competition and Consumer Commission’s recommendation to underwrite new dispatchable power projects.

On Thursday night a senior source said Turnbull was considering “heavy-handed intervention” to bring down prices. “The prime minister is not afraid to pull out the big stick on electricity companies if that’s what it takes,” the source said.

The stakes are clear. If everything went pear-shaped and there were enough floor-crossers in the House of Representatives to sink the package’s emissions reduction legislation, that would effectively (though not literally) amount to a vote of no confidence in the prime minister.

Hard to imagine, and probably only Abbott is thinking that far ahead. When other dissidents contemplate what could happen, some can be expected to fold on that ground alone.

Meantime, things fray as pressure mounts.

Take Peter Dutton’s Thursday interview with 2GB’s Ray Hadley. Hadley challenged Dutton over the energy policy, demanding to know, “Are you blindly loyal [to Turnbull]?” Instead of mounting a full-throttle defence of the policy, Dutton said he gave frank advice in private as a member of the cabinet and didn’t bag out colleagues or the prime minister publicly. This just left a question mark over what Dutton actually thinks about the policy.

Turnbull is up against multiple obstacles, apart from the insurgents.

He needs to get the states and the ACT onboard for the NEG, but the Victorian Labor government has a particular interest in procrastinating, and may do so until it goes into caretaker mode in October. It is judging what’s best for itself electorally, especially given its battle with the Greens in Melbourne’s inner metropolitan electorates.

Impatient as the federal government is to get finality on the NEG, it could be risky for it to press the Victorians too hard before the November state election. That might just increase the chances of a firm “no”. As one federal source says, Victoria needs to be accorded some space.

After the state election, things would be easier. If the government changed in Victoria, the new administration would sign up. If Labor was returned – and had left open its position on the NEG during the campaign – it might be more readily persuaded to fall into line.

Then there is federal Labor. It is generally thought the government will need ALP support to pass the emissions reduction legislation in the Senate, and defections could mean Labor was needed in the lower house too.

The argument has gone: Labor would try to amend the emissions reduction target in the legislation but, assuming that failed, it could then pass the legislation in order to take the climate/energy issue off the 2019 election agenda. That would leave a Shorten government able to increase the target later.

If Labor sees Turnbull being wounded by the internal battle, however, it would have every incentive to hold out on the emissions legislation, leaving the prime minister unable to deliver it.

Another set of players in Turnbull’s energy problems comprise the media shouters: Alan Jones, Hadley, Peta Credlin, Andrew Bolt.

They direct their megaphones to the so-called Coalition “base” and their messages resonate particularly with the Liberal National Party’s grass roots in Queensland. This makes some backbenchers nervous, inclining them (in one description) to “virtue signal” to the base.

Coalition backbenchers generally, increasingly frightened for their seats, are caught in a swirl of pressures and emotions. Some are angry at Abbott. Some look for an unrealistic nirvana, where prices suddenly plunge in time for the election.

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Some just want the NEG out of the way, a policy in the kit bag, whatever they think of it. NSW Liberal senator Jim Molan, who describes the NEG as “sub-optimal” told Sky he supported the package on the basis that “we’ve got to focus on getting re-elected”, noting: “I’ve spent all my life making rubbish policy work.” An endorsement of sorts.

Michelle Grattan, Professorial Fellow, University of Canberra

This article was originally published on The Conversation. Read the original article.

In the outrage over the Trump-Putin meeting, important questions were overlooked



File 20180808 191038 1cn053z.jpg?ixlib=rb 1.1
The outrage over Trump’s comments at the joint press conference meant an opportunity for meaningful debate about policy was lost.
AAP/EPA/Anatoly Maltsev

Filip Slaveski, Deakin University

In a now famous Fox News interview with Donald Trump in February 2017, Bill O’Reilly asked the new US president if he respected his Russian counterpart, Vladimir Putin. The following discussion ensued:

Trump: Well, I respect a lot of people but that doesn’t mean I’m going to get along with him.

O’Reilly: But he’s a killer though, Putin’s a killer.

Trump: There are a lot of killers, we’ve got a lot of killers. What do you think — our country’s so innocent?

Not a few viewers in countries on the wrong end of US foreign policy may have had to stop and catch their breath at Trump’s final sentence. A common thread of so many of their experiences of US foreign policy is not only the bombing from above. Many share a deep repugnance toward what they see as a well-manicured facade of American moral superiority, which helps to frame, water down or justify the violence and humiliations to which they are regularly subjected.




Read more:
Why the world should be worried about the rise of strongman politics


Just for that breathless moment, it seemed this sentence of moral relativism tore a hole in this façade and threatened the moral protection it provides to members of the American establishment.

It is these elected politicians from both major parties, military, state department and security officials, spies, advisers and lobbyists who have reacted most vociferously to Trump’s moral relativism in international affairs. This was perhaps most evident in his accommodating attitude to Putin in general, and especially in Helsinki last month.

In the blanket and largely uncritical Western news coverage of the establishment’s expressions of outrage, commentaries and interviews in response to the July meeting, Trump was depicted as a traitor to the US, Putin’s puppet and now even a greater threat to US national and, indeed, international security.

They may or may not be correct on some or all counts. But it is worth examining exactly what or whom Trump was betraying in Helsinki. So what did Trump do? He accepted uncritically (then later awkwardly back-tracked) Putin’s denial of election meddling and adopted much of his critique of US foreign policy over the last couple of decades.

As far as we know, Trump did not even interrogate Putin over his deadly meddling in Ukraine. He may not be particularly interested. In the lead-up to Helsinki, Trump trash-talked old US allies (including NATO).

Taken together, this conduct exacerbated the establishment fear that Trump was threatening to dismantle well-established Western political structures geared toward containing Russian influence carried over from the Cold War. These structures have been essential to cementing a broader post-Cold War US unipolarity. This has given the US political establishment a free hand to pursue its foreign policies without much restraint but with terrible consequences for those affected in, for example, the Middle East.

I doubt Trump is pursuing a grand strategy to unravel these structures, especially when his rhetoric displays a penchant, even a fetish, for the US unipolarity these strategies help foster.

Furthermore, his rhetoric has not really translated into significant foreign policy changes so far. Much of it is meaningless. But there is whole body of scholarship and commentary that would encourage Trump in any dismantling efforts, as it argues that the carrying over of Cold War structures of Soviet (Russian) containment such as NATO after 1991 have stood in the way of the development of more peaceable relations between Russia and the West. Indeed, structures like NATO fuel Russian anxieties and aggression, which NATO was founded to combat.

More traditional scholarship disputes these “revisionist” ideas, citing Russia’s aggression as evidence of the indispensability of containment to international security.

Scholars on both sides can find evidence to support their arguments in Russia’s annexation of Crimea and military intervention in Ukraine. But these revisionist ideas, or even the debate with more traditional ones, were hardly mentioned in the blanket media outrage over Helsinki. Critically, then, an examination of the object of Trump’s supposed “treachery” was also lacking when it was most needed.




Read more:
As Trump meets Putin, expectations may be high but the prospects are poor


The focus on outrage may just be the reality of covering an outrageous president in politically sensitive times. In any case, an issue remains for us in Australia to re-examine our own approach to Russia.

This could mean advocating a “new” revisionist or “new” traditional approach toward Russia in response to its conduct, especially in Ukraine. But it would also mean at least trying to untangle the latter from the broader implications of supporting American unipolarity and, hopefully, avoiding its consequences.

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This larger project beyond Russia is worth pursuing, if not for the sake of those who suffer its consequences around the globe, then at least for our own. Mass population dislocations, food shortages, terrorism and economic disruption threaten more than ever to reverberate all the way from those far-flung borders straight to our doorstep.

Filip Slaveski, Research Fellow, Alfred Deakin Research Institute, Deakin University

This article was originally published on The Conversation. Read the original article.

Australia could house around 900,000 more migrants if we no longer let in tourists



File 20180815 2900 xsnr42.jpg?ixlib=rb 1.1
International tourists use many of Australia’s resources, including adding to fossil fuel consumption.
from shutterstock.com

Raja Junankar, UNSW

Many who fear Australia’s population boom believe we should be cutting down on immigration. They blame immigration for congestion and expenditure of environmental and other vital resources. They say Australia’s cities are becoming overcrowded and cannot sustain more people.

But if Australia were to cut down on immigration, it would also then make sense to introduce policies that limit numbers of international tourists and students. Why single out one group of people? If any person living in Australia drains a certain amount of resources, it stands to reason this is also the case with short-term visitors arriving year after year.




Read more:
Migration helps balance our ageing population – we don’t need a moratorium


Not only do tourists and international students add to crowded trains, trams and buses, think of all the environmental resources they consume – such as the water hotels spend on frequently washing their sheets.

Just as with migration, tourist numbers are on the rise in Australia. The number of international tourists (blue line) increased from just over 4 million in 1997-98 to nearly 8 million in 2015-2016. Settler arrivals (people living in Australia who are entitled to permanent residence) increased from 81,000 in 1998 to 135,000 in 2016.

Tourist numbers are on the rise in Australia.
Australian Bureau of Statistics, Author provided

My crude calculations show that if Australia were to allow zero tourism, it could accommodate roughly 900,000 more migrants. As a comparison, Australia’s total migration intake is around 190,000 per year.

But of course curbing tourism, or immigration, isn’t a feasible option. Tourists, international students and migrants all add positive value to Australia.

Our calculations

As a general rule, the monetary amount spent across a group of people in a population is considered a rough approximation of the amount of resources that have been used. So, to get an idea of the resources short-term visitors to Australia (which includes tourists and international students who stay for less than a year) might use, I extracted data on how much they spend on goods and services.




Read more:
FactCheck: is Australia’s population the ‘highest growing in the world’?


Then I calculated the approximate number of migrants who would be spending the same amount of money. This gave me a rough indication of how many extra migrants we could let into the country per drop in tourist numbers.

I was a bit generous in terms of working off the assumption that migrants spend the same amount on goods and services as “native” Australians. I used ABS data for my calculations, which were:

  • First, I subtracted the amount international tourists spend (which includes students who stay less than a year) in Australia (this was A$33,917 million in 2015-16) from the total spend in Australia (A$940,822 million in 2015-16). This gave me an idea of the amount spent by Australian residents only (A$906,905 million in 2015-16).
  • I then worked out the average consumption of residents per capita by dividing it by the population (around 24 million in 2015-16). This came to A$37,680 million for every 1,000 people.
  • Then I divided the total spend of international tourists by the per capita amount (per 1,000 residents) spent by residents. This came to 900,213 in 2015-16.
  • I also did similar calculations assuming tourists consumed 10% and 20% more than migrants.

The fact we could have 900,000 extra migrants if we had no tourists is a very rough number. The point is not the exact number. Even if the more accurate number was 400,000, that number is large. The purpose of this exercise is to show that migrants, as one group of people, don’t pose the most significant risk to our population in terms of resources drained.

These numbers are based on crude calculations, and assume that migrants spend the same way as Australian-born residents.
CC BY-SA

It’s a rough guide

As already mentioned, my calculations were crude. More detailed calculation of resources consumed by both groups (immigrants and international tourists) would compare the different impacts on growth and employment of immigration. But for the purposes of this exercise, I’ve carried out more limited calculations.




Read more:
‘Sustainable tourism’ is not working – here’s how we can change that


The demographic profile of immigrants is also different from that of international tourists. And the spending patterns of immigrants would be very different from those of the tourists. Immigrants would be buying white goods, for instance, such as refrigerators, vacuum cleaners. Tourists would be buying these services indirectly through renting rooms in hotels, Airbnb and the like.

But we wouldn’t shut down tourism, as we know it has a positive impact on our economy. And research generally shows that immigration has a slightly positive effect on Australia’s employment rate and gross domestic product (GDP). A recent government report also shows that cutting Australia’s migration rate would cost the budget billions of dollars, lower living standards and reduce jobs growth.

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Both tourism and migration make a positive impact to our economy, and no one group should be blamed for draining our resources.

Raja Junankar, Honorary Professor, Industrial Relations Research Centre, UNSW

This article was originally published on The Conversation. Read the original article.

The renewable energy train is unstoppable. The NEG needs to get on board


Ken Baldwin, Australian National University

On the face of it, the National Energy Guarantee (NEG), adopted as Coalition policy at a party room meeting yesterday, appears to promise the certainty that industry, consumers and experts have desperately sought for the past decade. But beware: there is a renewable energy train coming down the track that is unstoppable.

The NEG cannot stop the train, but it could act as a guide rail to steer it – or even safely accelerate it – by reducing investment risk and lowering the cost of finance for renewable energy projects.




Read more:
Turnbull beats Abbott over NEG, now Frydenberg has to win Victoria


The latest figures indicate that the renewable energy train will smash Australia’s 2020 Renewable Energy Target. Assuming that the current pace of renewable energy investment continues (and there is good reason to expect that it will, given the unarguable economics of plummeting renewable energy prices worldwide), then the electricity sector would be on track to hit the government’s 26% emissions reduction target by 2030 with virtually no policy help at all.

The unstoppable renewable energy train may even end up contributing the lion’s share of the reductions needed to achieve Australia’s economy-wide target of cutting emissions by 26-28% relative to 2005 levels by 2030.

This would particularly be the case if we ramped up the electrification of other sectors such as transport and industry, and encouraged householders to replace gas with electricity for heating and cooking.

The big issue then would be whether the rest of the electricity system can adapt quickly enough as renewable energy reaches 50% and above. This would call for significant grid upgrades and storage systems, so as to provide efficient and reliable supply.

Missing the train?

With the NEG projected to deliver no more than 36% renewable energy by 2030, one could argue that this policy is simply waving from the platform as the renewables train goes whooshing by. But this argument ignores the impetus that the NEG would provide to advancing climate policy as a whole.

The NEG is widely regarded by energy analysts as the fourth-best solution – after a carbon pricing system, an emissions intensity scheme, or a clean energy target. But while many commentators have taken issue with both its ambition and its effectiveness, legislating the NEG would undeniably break the policy paralysis that has stopped Australia from moving forward for so many years.

There is no reason why a future government could not introduce other measures – such as an economy-wide price on carbon, regarded by most economists as the most efficient way to combat climate change. Such a scheme could be laid right over the top of the NEG and would drive further transformation not just of the electricity market, but every other sector of the economy. This would be complementary to the NEG and could help decarbonise the electricity sector even more rapidly.

Yet much of the opposition to the policy has come from government backbenchers concerned that it already puts too much emphasis on cutting emissions. How, then, can the NEG thread the political needle without being compromised as an effective tool for decarbonisation?

Making the NEG better

First, the mechanism itself needs to be decoupled from the ambition. That is, the politically charged emissions reduction target needs to be set not in legislation but by regulation, so that it can easily be used as a dial to tune the level of ambition.

Any future government could then ramp up the electricity sector’s emissions target beyond 26%. This could be done either to cover the inevitable shortfall in other sectors (where emissions reductions are harder to achieve), or to help deliver a steeper emissions-reduction trajectory if required by the world’s post-Paris progress. Bear in mind that signatories to the Paris Agreement have agreed to periodically review and tighten their emissions goals, meaning that Australia’s current target will probably be revised upwards.

Critics of this approach might argue that it provides less certainty to industry, rather than more. But the certainty would be established by the mechanism of emissions reductions rather than the rate. If that sounds hard to envisage, consider how financial institutions plan and prepare for changes to interest rates, within a broad economic regulatory framework.

A timetable for reviewing and adjusting emissions targets could be set in much the same way as the Reserve Bank of Australia handles interest rates, although this should perhaps be done on timeframes measured in years rather than months.

Second, the states need to be able to set their own renewable energy targets, independently of those states that currently have no target, such as New South Wales. One way to implement this would be for all states to agree to each comply with the minimum 26% target so there would be no free-riding on the back of those states that decide to be more ambitious than the national baseline.




Read more:
Emissions policy is under attack from all sides. We’ve been here before, and it rarely ends well


Whatever happens, the renewable energy train is building momentum, and the debates within COAG and with intransigent elements in the federal Coalition party room may end up being irrelevant in the long run.

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But for the sake of our future, the resolution of climate and energy policy via the NEG will be an important baby step that helps to underpin the cost of decarbonising our entire economy. To do that, we must first pick the lowest-hanging fruit: the electricity sector.

Ken Baldwin, Director, Energy Change Institute, Australian National University

This article was originally published on The Conversation. Read the original article.